Psy-Ed Corporation & another vs. Stanley Klein & another; David Hirsch & others, third-party defendants (and a companion case)
Case Details
- Citation
- 459 Mass. 697
- Procedural Posture — the stage the case had reached
- appeal
- State
- Massachusetts
- Circuit
- 1st Circuit
Related Laws
No specific laws identified for this ruling.
Claim Types
Outcome
Former employees Klein and Schive prevailed on retaliation and abuse of process claims against their former employer Psy-Ed Corporation and its officers. The court vacated some judgments and remanded for further proceedings on tortious interference and other claims due to insufficient factual findings.
Excerpt
Psy-Ed Corporation & another vs. Stanley Klein & another; David Hirsch & others, third-party defendants (and a companion case). Middlesex. January 3, 2011. May 12, 2011. Present: Ireland, C.J., Spina, Cordy, & Botsford, JJ. Employment, Termination. Anti-Discrimination Law, Termination of employment. Employment, Retaliation. Abuse of Process. Contract, Interference with contractual relations. Consumer Protection Act, Businessman’s claim. Damages, Emotional distress, Attorney’s fees. Discussion of G. L. c. 151B, § 4 (4) and (4A), which prohibits retaliation and adverse employment actions, and of the limits that State and Federal constitutional rights to seek judicial resolution of disputes impose on the scope of the statute in circumstances in which the filing of a lawsuit is the alleged retaliatory act. [706-708, 709-710] In a civil action, the judge, in determining that a former employee had established a claim of retaliation by her employer in violation of G. L. c. 151B, § 4 (4) and (4A), properly concluded that the employee had engaged in legally protected conduct in bringing a claim of discrimination in employment before the Massachusetts Commission Against Discrimination (commission), that the civil action that the employer and an officer and director of the employer brought against the employee was an adverse employment action that was baseless, that there was a causal connection between the protected conduct and the adverse action, and that the employee acted reasonably and in good faith in believing that she had suffered discrimination and reasonably responded to that belief by filing a complaint with the commission. [710-712] In a civil action in which a former employee brought a counterclaim against his former employer for retaliation in violation of G. L. c. 151B, § 4 (4) and (4A), the judge erred in granting summary judgment in favor of the employer, on the ground that the retaliatory acts alleged occurred more than two years after the employment relationship between the two parties had been terminated, where a person need not be a current employee to enjoy the protection of the statute. [708-709, 712-713] This court vacated a judgment in a civil action in favor of two former employees on counterclaims alleging abuse of process against their former employer and an officer and director of the employer, where the judge erroneously relied on the standard for the separate tort of malicious prosecution and, with respect to one employee, did not indicate whether he adopted or rejected the employee’s position that the employer and the officer and director brought a lawsuit against her in order to gain a collateral advantage, i.e., to discourage her from pursuing her claims before the Massachusetts Commission Against Discrimination, to distract her from those claims and impose legal costs on her, and to induce her to abandon those claims [713-715]; and where, with respect to the other employee, the judge’s findings did not clearly identify what, if any, ulterior purpose and collateral advantage the employer and the officer and director sought in bringing suit against the employee [715]. This court vacated a judgment in a civil action in favor of a former employee on a counterclaim of tortious interference with his contract with his former employer, brought against an executive officer and director of the employer, where the judge made no findings on the issue whether the officer and director induced the employer to commit a breach of a contract (a promissory note) to which the officer and director was not himself a party, nor on the antecedent issue whether the vote by the board of directors of the employer (board) to suspend payments on the promissory note caused the employer to commit a breach of the contract [715-718]; further, this court reversed the judgment in favor of the former employee on his claim against the other board members for tortious interference with his contract with the employer, where the former employee failed to demonstrate actual malice [718-719]. In a civil action, the judge did not err in concluding that a former employee had not established a claim of a violation of G. L. c. 93A, § 11, against his former employer, a director and officer of the employer, and members of the board of directors (board) of the employer, where the dispute arose out of a private transaction between the board and the former employee in his role as an employee and shareholder of the company, a context in which they were operating as a single business enterprise. [719-720] In a civil action, the judge erred in dismissing the counterclaims of the defendants, an employer and an officer and director of the employer, against a former employee, on the ground that the defendants’ efforts to amend a complaint they had filed in a separate, earlier action against the former employee to raise the same claims had been denied as untimely, where the defendants’ counterclaims were not so closely connected to the claims in their own, earlier complaint as to be derivative of that pending action. [720] In a civil action in which a judge other than the trial judge held a posttrial, nonevidentiary hearing to determine damages on the successful counterclaims of two parties, the second judge acted within her discretion in her award of damages to one of the parties for emotional distress [720-721]; however, she erred in declining to hold at least a limited evidentiary hearing on the issue of attorney’s fees [722], Civil actions commenced in the Superior Court Department on December 17, 1999, and December 12, 2002. Following consolidation, the case was heard by Julian T. Houston, J., and a hearing on damages was had before Sandra L. Hamlin, J. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Jeffrey S. Robbins (A.W. Phinney, III, with him) for Psy-Ed Corporation & another. Donna M. Brewer for David Hirsch & others. Kurt S. Kusiak (A. Hether Cahill with him) for C. Kenneth Mehrling. George P. Field for Stanley D. Klein. Dahlia C. Rudavsky (Kevin C. Merritt with her) for Kimberly Schive. The following submitted briefs for amici curiae: Jack F. St. Clair for International Committee Against Mental Illness & others. Anne L. Josephson, Heidi S. Alexander, & Nina Joan Kimball for Charles Hamilton Houston Institute for Race and Justice & others. Robert S. Mantell, Elizabeth A. Rodgers, Sara Smolik, & Tara M. Swartz for Massachusetts Employment Lawyers Association. Simone R. Liebman & Catherine Ziehl for Massachusetts Commission Against Discrimination. Joseph Valenzano, Jr. Kimberly Schive. Robert Striano, Donald S. Chadwick, and C. Kenneth Mehrling. Stanley D. Klein vs. Psy-Ed Corporation & another. Botsford, J. This case involves bitter litigation spanning more than a decade. It raises the question, among others, whether actions taken by an employer against a former employee may violate G. L. c. 15IB, § 4 (4) and (4A), sections of the anti-discrimination law that respectively prohibit retaliation and interference with a protected right. On this question, we conclude that an employer or other person may be liable to a former employee under these sections for retaliatory or interfering conduct that occurs after the employment relationship has terminated. We defer all discussion of the additional issues raised until later in this opinion. 1. Background, a. Introduction. Before us are cross appeals from judgments in two actions in the Superior Court. The first was brought in 1999 by Psy-Ed Corporation (Psy-Ed, or company) and Joseph Valenzano, Jr., against Dr. Stanley Klein and Kimberly Schive. Klein brought the second action in 2002 against Valenzano and Psy-Ed, setting out a claim of retaliation. The two actions were consolidated prior to trial, which took place in 2006. We summarize first the facts as the trial judge found them, followed by a summary of the procedural history of the two actions. We reserve for later discussion the posttrial proceedings. b. Facts. Klein, Maxwell Schleifer, and a third man founded Psy-Ed in 1969. In 1971, Psy-Ed began publishing Exceptional Parent (EP), a magazine for families of children with disabilities and special health care needs; Klein and Schleifer served as copublishers. In the early 1990s, Psy-Ed began to have financial problems, and in 1993, Valenzano was approached to evaluate Psy-Ed as an investment opportunity. He decided to invest, and brought in about forty other investors. In the resulting restructuring of the company, Psy-Ed bought Schleifer’s shares, Klein remained with the company and became editor-in-chief of EP, Valenzano joined Psy-Ed as president, chief executive officer, a member of the company’s board of directors (board), and publisher, and the company opened a second office in New Jersey in addition to its original Massachusetts office. At various times after 1993, the third-party defendants, Kenneth Rossano, Dr. David Hirsch, Robert Striano, Donald S. Chadwick, and Robert K. Hopkins, served as members of the board. During Klein’s employment as editor-in-chief, there were disagreements between him and the board. From 1993 until 1996, Schive worked for Psy-Ed in the Massachusetts office, first as an assistant editor of EP and later as associate editor. Schive, who is deaf, required certain accommodations to be provided by her employer, including an interpreter at meetings. On several occasions, she was not provided an interpreter at meetings, and she perceived Valenzano to be impatient and angry at questions she asked while attempting to follow the discussion. In the summer of 1996, during the restructuring process initiated by Valenzano’s new management team, certain functions were moved to New Jersey, and Schive was told she would continue to have a role at Psy-Ed. However, she was offered only a three-month position as a part-time consultant, and thereafter she no longer worked for the company. On February 13, 1997, Schive filed a charge of discrimination with the Massachusetts Commission Against Discrimination (MCAD). On June 13, 1997, at Valenzano’s request and despite misgivings of which Valenzano was aware, Klein signed an affidavit generally supportive of Psy-Ed’s position in Schive’s MCAD matter. Klein was informed in June, 1997, that his employment contract with Psy-Ed was due to expire on June 30, and that it would not be renewed. Klein still held a twenty-one per cent interest in the company, however, and he proposed an alternative slate of Psy-Ed directors for election at a shareholders’ meeting on September 30, 1997. Valenzano, meanwhile, promoted the election of his own preferred slate. Klein’s attempt to have Psy-Ed shareholders elect his slate of directors failed at the September shareholder meeting. His proxy fight lost, Klein entered into negotiations with representatives of Psy-Ed for a complete and permanent separation from the company. Valenzano began negotiating with third-party defendant C. Kenneth Mehrling to arrange financing for the acquisition of Klein’s shares. On March 27, 1998, Klein, Psy-Ed, and Valenzano executed a settlement agreement that included a mutual release of all claims (settlement agreement). Under the terms of the settlement agreement, Klein received an initial payment of $45,000 and a promissory note specifying sixteen quarterly payments of $13,797.19, for a total of $265,755, while Psy-Ed reacquired all of Klein’s shares in the company. On October 6, 1997, without Valenzano’s knowledge and while the negotiations over buying out Klein’s Psy-Ed shares were in process, Klein signed a second affidavit in connection with Schive’s MCAD charge against Valenzano and Psy-Ed. In his second affidavit, which was filed with the MCAD, Klein stated that after preparing his June, 1997, affidavit, he had become aware of and dissatisfied with the company’s response to Schive’s charge, as well as the manner in which his earlier affidavit had been characterized in that response. Klein also stated in the second affidavit that after completing the first affidavit, he had been reminded of certain incidents by former members of the Massachusetts staff. In September, 1999, Valenzano became aware of Klein’s second affidavit in the Schive MCAD matter. He became aware as well that a former Psy-Ed sales and marketing contractor, Lawrence Qualiano, also had signed an affidavit in support of Schive’s claim. At the next formal meeting of Psy-Ed’s board of directors, held on September 30, 1999, the directors addressed the affidavits of Klein and Qualiano. They decided to terminate the company’s involvement in an ongoing mediation of Schive’s discrimination complaint before the MCAD, and agreed to “litigate this matter aggressively.” On December 2, 1999, the MCAD issued a probable cause determination in Schive’s favor on her complaint. On December 17, 1999, Psy-Ed and Valenzano filed a complaint against Klein and Schive in which they alleged defamation, violation of G. L. c. 93A, § 11, civil conspiracy, and tortious interference with contractual and business relations (1999 action). Before serving either defendant, the board met on December 23, 1999, and voted five-to-one to discontinue further payments to Klein under the promissory note attached to the settlement agreement until Klein signed a settlement agreement between Psy-Ed and Qualiano, and until authorized by the board “based on the opinion of Boston counsel and their assessment and evaluation of alternative scenarios and their estimate of legal costs associated with the litigation the company has filed against Stan Klein and Km Schive.” Rossano’s was the sole dissenting vote. c. Prior proceedings. As just stated, Psy-Ed and Valenzano filed their action against Kein and Schive in December, 1999. In response, Klein counterclaimed against Psy-Ed and Valenzano and brought a third-party complaint against Rossano and the other members of the board. In his counterclaim and third-party complaint, Klein alleged interference with contractual relations by Valenzano, Rossano, and the other board members. He also alleged abuse of process by Psy-Ed and Valenzano, and violations of G. L. c. 93A, § 11, by Psy-Ed, Valenzano, and the board members. On account of Psy-Ed’s 1999 action, Schive filed another complaint with the MCAD on February 17, 2000, asserting a claim of retaliation in violation of G. L. c. 151B against Psy-Ed and Valenzano. Thereafter, as authorized by G. L. c. 151B, § 9, she brought this retaliation claim in the Superior Court as a counterclaim in the 1999 action. At the same time, Schive counterclaimed against Psy-Ed and Valenzano for abuse of process. Psy-Ed and Valenzano moved to amend their complaint in November, 2000, to add an allegation that by executing the settlement agreement without disclosing his second affidavit, Klein fraudulently induced them to enter the settlement agreement. A Superior Court judge (the eventual trial judge) denied Psy-Ed’s and Valenzano’s motion as untimely under the tracking order applicable to the case. In 2002, Klein filed a separate complaint against Psy-Ed and Valenzano alleging retaliation in violation of G. L. c. 15IB, § 4 (4) and (4A) (§ 4 [4] and [4A]) (2002 action). In response, Psy-Ed and Valenzano counterclaimed, alleging breach of contract and fraud. On December 1, 2003, a Superior Court judge allowed Klein’s motion to dismiss the counterclaims because in the 1999 action, Psy-Ed and Valenzano’s attempt to add a breach of contract claim had been dismissed as untimely, and the allegation of fraud arose out of the same transaction as the barred breach of contract claim. In April, 2005, a different Superior Court judge (motion judge) entered judgment sua sponte against Klein on his retaliation claims because the alleged conduct had occurred when he was no longer an employee. By the time of trial, in June, 2006, no claims remained in Psy-Ed’s and Valenzano’s 1999 action against Schive, and only one claim, for defamation, remained against Klein. The trial judge tried that claim and the remaining counterclaims and third-party claims of Klein and Schive in a jury-waived trial, and thereafter issued findings of fact, rulings of law, and an order of judgment. He rejected Psy-Ed’s and Valenzano’s claim of defamation. The judge found in favor of Klein on his claim of tortious interference with contractual relations, in favor of Klein and Schive on their respective claims of abuse of process, and in favor of Schive on her retaliation claim. He found against Klein on his remaining claims, including violation of G. L. c. 93A, § 11. In his order, the trial judge indicated a hearing would be held to determine damages with respect to those counterclaims on which he had found liability. However, the trial judge retired before holding such a hearing. As we explain in more detail below, a different Superior Court judge (posttrial judge) held a nonevidentiary hearing on damages on January 4, 2008. On March 13, 2009, she awarded Klein $125,000 in emotional distress damages in connection with his claims of abuse of process and tortious interference with contractual relations, $124,174.71 plus prejudgment interest in connection with the unpaid principal on the promissory note, $510,960.23 in attorney’s fees, and $17,002.50 in costs. The same day, she awarded Schive $125,000 in emotional distress damages, $443,040.95 in attorney’s fees, and $20,407.65 in costs. In Schive’s case, judgment entered against Psy-Ed and Valenzano, the only defendants named in her counterclaims. All amounts due to Klein, however, were awarded and assessed jointly and severally against Psy-Ed, Valenzano, and four of the six third-party defendants: Hirsch, Striano, Chadwick, and Mehrling. Before us are multiple appeals. Psy-Ed and Valenzano appeal from and argue error in the judgments against them on Klein’s claims of tortious interference with contractual relations and abuse of process, and on Schive’s claims of abuse of process and retaliation. Psy-Ed and Valenzano also argue abuse of discretion or other error of law in the denial of Psy-Ed’s and Valenzano’s motion to amend the complaint in the 1999 action and in awarding damages without conducting further evidentiary hearings. Hirsch, Chadwick, Striano, and Mehrling appeal from and claim error in the judgments against them on Klein’s claim of tortious interference with contractual relations. Finally, Klein appeals and challenges the entry of summary judgment on his claims of retaliation under § 4 (4) and (4A) and the entry of judgment against him on his claim of unfair or deceptive conduct under G. L. c. 93A, § 11. 2. Retaliation, a. Generally. Both Schive and Klein claim they were the victims of retaliation in violation of G. L. c. 151B. Chapter 151B, however, does not actually use the word “retaliation.” Rather, § 4 (4) makes it unlawful for “any person ... to discharge, expel or otherwise discriminate against any person because he has . . . filed a complaint, testified or assisted in any proceeding under [G. L. c. 15IB, § 5],” while § 4 (4A) makes it unlawful for “any person to coerce, intimidate, threaten, or interfere with another person in the exercise or enjoyment of any right granted or protected by this chapter, or to coerce, intimidate, threaten or interfere with such other person for having aided or encouraged any other person in the exercise or enjoyment of any such right granted or protected by this chapter.” A claim of retaliation may succeed even if the underlying claim of discrimination fails, provided that in asserting her discrimination claim, the claimant can “prove that [she] reasonably and in good faith believed that the [employer] was engaged in wrongful discrimination.” Abramian v. President & Fellows of Harvard College, 432 Mass. 107, 121 (2000), quoting Tate v. Department of Mental Health, 419 Mass. 356, 364 (1995). In the absence of direct evidence of a retaliatory motive, to make out a prim
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